Strategic Analysis

Strategic Analysis

 Answer Three Questions

– Where is the organization now?
– Where will the organization be in a few
years – if no changes are made
– What specific actions should management
take if they don’t like the answer to #2
Decision Making Process
P. 12-13

Examine &
Evaluate the Interview
Evaluate Current: Strategic
Current - Mission Managers:
Performance - Objectives - BOD
- Strategies - Top Mgmt
- Policies
Decision Making Process

Scan Select
External Strategic
Environment Factors
- Societal - Opportunities
- Tasks - Threats Analyze
Strategic
Factors
(SWOT)
in light of
Scan Select Current
Internal Strategic Situation
Environment Factors
- Structure - Strengths
- Culture - Weaknesses
- Resources
Decision Making Process

Review and
Revise as Generate & Select &
Necessary: Evaluate Recommend
- Mission Strategic Best
- Objectives Alternatives Alternatives
Decision Making Process

Implement Go
Back To
Strategies: Evaluate Evaluate
Step 1
- Programs And Current
- Budgets Control Performance
- Procedures
Decision Making Process

Customers

Revenue

Admin
P&L
HR Sales
Bal Sheet
MIS Marketing
S&UF

Operations
 External Environment
Environment
Socio-cultural

ral

Ge omic
hic
Industry
ne

Ec

n
r ap

e ra
Environment

on
Ge
og
Threat of new entrants

l
m

Power of suppliers
De

Power of buyers
Product substitutes
Intensity of rivalry

l
ga
nt
En

/Le
Competitor
Gl

e
vir

nm
ca l
ob

Environment
al

li ti
o

o
nm

vir
Po
e

En
nt

Technological

General
External Environment

A continuous process which includes

• Scanning: Identifying early signals of environmental
changes and trends
• Monitoring: Detecting meaning through ongoing
observations of environmental changes and trends
• Forecasting: Developing projections of anticipated
outcomes based on monitored changes and trends
• Assessing: Determining the timing and importance of
environmental changes and trends for firms’
strategies and their management
 Industry Environment
n g Th
o s re
A m irm at
ry F of
a l in g Ne
v
Ri pe t w
m En
Co tr a
nt
s

pl ier er of
Thre Produc

Five Forces of

w
at o

s
g Po
Competition
f Su s

ai nin
Sup
bstit
t

Ba rg
ute

Bargaining Power of
Buyers
Threat of New Entrants
Barriers to Entry

 Economies of scale
 Product differentiation
 Capital requirements
 Switching costs
 Access to distribution channels
 Cost disadvantages independent of scale
 Government policy
 Expected retaliation
Bargaining Power of Suppliers

 Dominated by a few large companies

 Satisfactory substitute products are not available
 Industry firms are not a significant customer for the
supplier group
 Suppliers’ goods are critical to buyers’ marketplace
success
 Effectiveness of suppliers’ products has created high
switching costs
 Suppliers are a credible threat to integrate forward
into the buyers’ industry
Bargaining Power of Buyers
(Customers)

 They purchase a large portion of an industry’s total

output
 Sales of the product being purchased account for a
significant portion of the seller’s annual revenues
 They could easily switch to another product
 The industry’s products are undifferentiated or
standardized, and buyers pose a credible threat if
they were to integrate backward into the seller’s
industry
Threat of Substitute Products

 Customers face few switching costs

 Substitute product’s price is lower
 Substitute product’s quality and performance
capabilities are equal to or greater than those of
the competing product
Intensity of Rivalry

 Are numerous or equally balanced

 Experience slow industry growth
 Have high fixed costs or high storage costs
 Lack differentiation or low switching costs
 Experience high strategic stakes
 Have high exit barriers
 Components of Strategic
Internal Analysis Competitiveness

Competitive
Core Discovering Core Advantage
Competencies Competencies
Marketing Mix
Capabilities

Four Criteria Value

Resources of Sustainable Chain
• Tangible
• Intangible Advantages Analysis

Corporate Culture
• Valuable • Outsource
R&D • Rare
Capital Situation • Costly to Imitate
Technology • Non-substitutable
The Basic
Value Chain
M
gin ar
ar gin
M

Technological Development
Human Resource Mgmt. Service
Firm Infrastructure
Support Activities

Marketing & Sales

Procurement Outbound Logistics

Operations
Inbound Logistics

Primary Activities
Quiz – Question 1

1. When an organization is evaluating its strategic

position, which is NOT one of the strategic
questions it should ask itself?
A. Where is the organization now?
B. How can functional and operational areas be
improved?
C. If no changes are made, where will the organization
be in one year?
D. If the evaluation is negative, what specific actions
should management take?
E. If no changes were made, where will the organization
be in 10 years?
Quiz – Question 1

1. When an organization is evaluating its strategic

position, which is NOT one of the strategic
questions it should ask itself?
A. Where is the organization now?
B. How can functional and operational areas be
improved?
C. If no changes are made, where will the organization
be in one year?
D. If the evaluation is negative, what specific actions
should management take?
E. If no changes were made, where will the organization
be in 10 years?
Quiz – Question 2

2. Strategic planning within a small organization

A. May be informal and irregular
B. Must be elaborate to allow for future growth
C. Should be formalized and explicitly stated
D. Should be done by the President only
E. Is unnecessary and a waste of time
Quiz – Question 2

2. Strategic planning within a small organization

A. May be informal and irregular
B. Must be elaborate to allow for future growth
C. Should be formalized and explicitly stated
D. Should be done by the President only
E. Is unnecessary and a waste of time
Quiz – Question 3
3. Research done by Henry Mintzberg suggests that
strategy formulation
A. Is irregular and a discontinuous process
B. Should be followed unswervingly to ensure success of
the plan
C. Is worthless
D. Should be reviewed after a specific interval of time to
make sure it is still applicable
E. Is merely a checklist of actions following a logical
process
Quiz – Question 3
3. Research done by Henry Mintzberg suggests that
strategy formulation
A. Is irregular and a discontinuous process
B. Should be followed unswervingly to ensure success of
the plan
C. Is worthless
D. Should be reviewed after a specific interval of time to
make sure it is still applicable
E. Is merely a checklist of actions following a logical
process
Quiz – Question 4

4. Which of the following is NOT one of the five

triggering events that are the stimulus for a
strategic change?
A. Intervention by the organization’s bank
B. Entrance of a new competitor into the industry
C. Change in ownership of the organization
D. New CEO
E. Decreased profitability
Quiz – Question 4

4. Which of the following is NOT one of the five

triggering events that are the stimulus for a
strategic change?
A. Intervention by the organization’s bank
B. Entrance of a new competitor into the industry
C. Change in ownership of the organization
D. New CEO
E. Decreased profitability
 Quiz – Question 5

5. Which of the following is an example of a strategy?

A. Diversify the product line to appeal to more people
B. Increase sales by 10% over last year
C. Pay highest salaries to keep high quality employees
D. Develop and sell quality appliances world-wide
E. Divide a sales region into a group of sales districts
 Quiz – Question 5

5. Which of the following is an example of a strategy?

A. Diversify the product line to appeal to more people
B. Increase sales by 10% over last year
C. Pay highest salaries to keep high quality employees
D. Develop and sell quality appliances world-wide
E. Divide a sales region into a group of sales districts
Analysis Tools – SWOT
Chapter 5

 Strengths  Opportunities

 Weaknesses  Threats
Strategy Development - TOWS

TOWS Analysis Opportunity Threat

Strength O/S Strategies T/S Strategies

Identify strategies that
Identify strategies
focus the organization’s
that focus strengths
strengths on
against threats
opportunities

Weakness O/W Strategies T/W Strategies

Identify strategies that
Identify strategies that
shore up weaknesses to
allow the pursuit of
shore up weaknesses
opportunities
SWOT Example – Bicycle Co.

 Strengths  Opportunity
– Innovation – International growth
– Quality – Dirt bikes
– Brand in segment
– Flexible
manufacturing
 Threats
 Weaknesses
– Lower cost, higher
– Cost quality competition
– Financial size – Flattening demand
TOWS Example – Bicycle Co.

TOWS Analysis Opportunity Threat

• International • Flat demand
• Dirt bikes • Lower cost, higher quality

Strength O/S Strategies T/S Strategies

• Innovation
• Quality • Grow international • Grow international
• Brand in segment • Develop/enter dirt bikes • Develop/enter dirt bikes
• Flexible manufacturing

Weakness O/W Strategies T/W Strategies

• Grow international to
• Cost increase economies of • Grow international
scale • Develop/enter dirt bikes
• Financial size
• Int’l alliances